Euro Rallies Higher Against US Dollar on Hawkish ECB Minutes

The euro today rallied higher against the US dollar after hawkish comments from the European Central Bank minutes released today. Weak initial jobless claims data from the US docket also contributed to the EUR/USD’s rally as it did not meet market expectations.

The currency pair gained over 70 points at the height of its rally reversing most of the losses it had sustained over the past three days.

The ECB minutes indicated that the bank would consider reversing its quantitative easing program if the Eurozone’s inflation outlook changed. Hawkish comments from the ECB’s François Villeroy de Galhau who is also the Governor of the Bank of France stating that the ECB’s non-standards policies are not eternal also fueled the pair’s rally. Positive Markit Germany Construction PMI and Positive Markit Germany Retail PMI also boosted the single currency. Higher treasury yields in many EU countries such as France and Spain also boosted the single currency.

The release of weak ADP employment change data, which came in at 158,000 versus the expected 188,000 also contributed to the overall greenback weakness. The initial jobless claims released by the Department of Labor, also had a negative impact on the greenback as it was recorded at 248,000 versus the expected 243,000. The positive ISM Services/Non-Manufacturing Composite could not boost the US dollar.

The currency pair’s future performance is likely to be affected by the release of the US non-farm payrolls scheduled for tomorrow.

The EUR/USD currency pair was trading at 1.1405 as at 15:48 GMT having rallied from a low of 1.1328. The EUR/JPY was trading at 129.22 having risen from a low of 127.97 earlier today.

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